NPS Withdrawal Rules

What is the NPS Withdrawal Online Rule?

The National Pension Scheme (NPS) provides a structured approach to retirement savings, with flexible withdrawal options once you reach the retirement age, typically around 60 years, or upon superannuation. At the time of retirement, you can access up to 60% of your total corpus as a lump sum, while the remaining 40% must be used to purchase an annuity. This ensures a steady income stream post-retirement.

If you are a corporate sector employee and your total corpus is less than ₹5 lakh, you are eligible for a full lump sum withdrawal. However, if the corpus exceeds ₹5 lakh, the rules mandate that 40% of the total corpus be used to buy an annuity, with the remaining 60% available as a lump sum. Similarly, government employees with a corpus of up to ₹5 lakh can withdraw the full amount. For larger amounts, at least 40% must be used for annuity purchase. These provisions are built to offer both flexibility and financial security for post-retirement income.

NPS Withdrawal Online Limit

The National Pension Scheme (NPS) offers two types of accounts, Tier I and Tier II, each with different withdrawal guidelines based on the purpose and structure of the account.

NPS Tier 1 Withdrawal Online:

Tier I accounts have specific withdrawal rules that come into play under various circumstances:

Partial Withdrawal:

• You can withdraw a portion of your NPS Tier I account under conditions like funding higher education, medical treatment, children's marriage, or purchasing a house, excluding already owned properties.

Withdrawal Before Maturity:

• You can't withdraw from a Tier I account before turning 60. However, early withdrawals are permitted under special circumstances, such as severe illness or permanent disability.

Withdrawal After Maturity:

• Upon turning 60, you can withdraw up to 60% of the corpus as a lump sum from the Tier I account. The remaining 40% must be used to purchase an annuity that guarantees a regular pension income for your lifetime.

Tier II Withdrawal Limits:

Unlike Tier I accounts, Tier II accounts are more flexible, allowing you to withdraw without restrictions. This makes Tier II accounts suitable for easy access to your money.

Tax Implications:

While Tier I accounts offer tax benefits under Section 80C, Tier II accounts do not provide these advantages. You can select Tier II accounts for their greater flexibility and liquidity, particularly when tax benefits are not the main concern.

What are the Rules About NPS Withdrawals Online?

Here's how the withdrawal rules vary based on different subscriber categories:

Rules Applicable to Government Sector Participants Upon Retirement:

• A minimum of 40% must go into annuity.
• Remaining funds can be withdrawn as a lump sum.
• Lump sum withdrawals can be postponed until the age of 70.

Rules Applicable to Government Sector Subscribers Taking Voluntary Retirement:

• A minimum of 80% of the accumulated corpus must be invested in annuity.
• If the total corpus is below ₹1 lakh, a full withdrawal is allowed.

Rules Applicable to the Death of a Government Sector Subscriber:

In the event of a government sector subscriber's death, the nominee or legal heir is entitled to withdraw the full corpus as per the applicable NPS rules.

Rules Applicable to Corporate Sector Employees & Citizens on Retirement:

• A minimum of 40% must be used for annuity.
• The remaining 60% can be withdrawn as a lump sum.
• You can postpone lump sum withdrawal until the age of 70.

Rules Applicable to Corporate Sector Employees & Citizens on Voluntary Exit:

• You must have maintained your account for at least 10 years.
• 80% of your pension corpus must be allocated to annuity.

Rules Applicable to the Death of a Corporate Sector Subscriber:

In the unfortunate event of your death, the nominee has the option to withdraw the entire accumulated corpus as a lump sum, ensuring they receive the NPS death benefits.

What are the NPS Partial Withdrawal Rules?

NPS allows you to make partial withdrawals under specific conditions:

• Frequency: You can withdraw only three times during your subscription tenure.
• Limit: Withdrawals are capped at 25% of your contributions to the scheme.
• Eligibility: You need to have contributed for at least three years.
• Exceptional Cases: Partial withdrawal is permitted in specific situations, including education expenses, marriage, house construction, or medical emergencies.

What are the NPS Premature Withdrawal Rules for Tier I & II?

NPS Tier I Withdrawal Online Rules:

As an NPS Tier I subscriber, you can make partial withdrawals for critical needs like medical treatment, education, or marriage after a minimum investment tenure of 3 years. The NPS withdrawal online is capped at 25% of the corpus, and you can apply for it a maximum of 3 times with at least a 5-year gap between each withdrawal. All partial withdrawals are tax-free.

For example,

If you begin investing in your NPS account at the age of 38 and contribute a total of ₹ 3,00,000 by the age of 43, you are eligible to withdraw up to ₹ 75,000 (25%) for specific situations like medical emergencies, your child's education, or a marriage. The remaining balance of your account will continue to grow and must be used to purchase annuities once you reach retirement age, ensuring a steady pension income.

NPS Tier II Withdrawal Rules:

NPS Tier II accounts offer greater flexibility compared to Tier I accounts, allowing you to make partial withdrawals at any time, for any purpose, without specific restrictions. Unlike Tier I, which has predefined withdrawal conditions, Tier II provides unrestricted access to funds.

However, it is important to note that Tier II accounts do not offer the same tax benefits as Tier I. While withdrawals are allowed freely, the withdrawn amount is subject to taxation. You should be aware of the tax implications before making withdrawals.

For example,

If you invest ₹ 3,00,000 in an NPS Tier II account. You can withdraw any amount anytime without restrictions. For instance, you can take out ₹ 1,00,000 for personal use. However, the withdrawn amount will be taxed based on your income tax bracket.

What are the Conditions for Partial NPS Withdrawal?

Partial withdrawals from NPS Tier I accounts are allowed under specific conditions set by PFRDA:

• Children's Higher Education: You can withdraw funds to pay for your child's higher education-related expenses.
• Children's Marriage: Partial withdrawal is permitted to cover the marriage expenses of your children.
• House Purchase or Construction: Funds can be withdrawn to buy or construct a house in your or the joint name.

What are NPS Exceptions for the Five-Year Gap Rule?

The National Pension Scheme (NPS) allows exceptions to the five-year gap rule in certain urgent cases. Early withdrawals are permitted in situations involving severe illness, major accidents, or life-threatening conditions, such as:

• Coronary Artery Bypass Graft
• Accident of a serious or life-threatening nature
• Major Organ Transplant
• Total blindness
• Coma
• Multiple Sclerosis
• Kidney Failure (End Stage Renal Failure)
• Primary Pulmonary Arterial Hypertension
• Myocardial Infarction
• Stroke
• Cancer
• Heart Valve Surgery
• Paralysis
• Aorta Graft Surgery
• Any life-threatening critical illness, as stipulated in the guidelines, circulars, or notifications issued from time to time by the Authority

What are the Documents Required for NPS Withdrawal Online?

For NPS withdrawal online, you'll need:

• Identity Proof: Aadhaar, PAN, Passport, etc.
• Address Proof: Electricity bill, Ration card, etc.
• Original PAN Card: Essential for verification.
• Bank Documents: Bank's letterhead, passbook, cancelled cheque, or bank certificate.

Proof of account details:

Before proceeding with an NPS withdrawal online, make sure you have all the required documents ready:

• Undertaking and Request Form: Applicable if you're eligible for a full withdrawal.
• Advance Stamped Receipt: Completed and signed with a revenue stamp.

Note: Ensure all documents are accurate for a smooth NPS withdrawal online.

What is the NPS Withdrawal Process?

The withdrawal process for the National Pension Scheme (NPS) can be carried out offline by completing the relevant form. There are three distinct NPS forms for different withdrawal scenarios:

• Exit from NPS subscription before maturity
• Withdrawal upon superannuation or in case of incapacity (maturity)
• Partial withdrawal of NPS contribution

If you're a government employee, a specific NPS withdrawal online form is applicable. To initiate the withdrawal, submit the appropriately filled forms along with necessary documents at the nearest NPS Point of Presence (PoP).

Required Details for NPS Withdrawal

Ensure the form includes the following details:

• PRAN number
• PAN number
• Your name, address, and gender
• Your date of birth
• Nominee details
• Bank account details (account number, IFSC code, bank name, and branch address)

Information About the Corpus and Annuity Options

As a National Pension Scheme (NPS) subscriber, you can choose from a variety of annuity options when it comes time to make your withdrawal. These options provide flexibility and allow you to tailor your retirement income to suit your needs. Some of the available options include:

• Pension Payable for Life: This provides a pension for your entire lifetime, offering financial security throughout retirement.
• Fixed-Term Annuity: You can opt for a fixed annuity period, with payments guaranteed for a chosen number of years (5, 10, 15, or 20), even if you pass away before the term ends.
• Annuity with Refund on Death: In the event of your death, the full purchase price of the annuity is refunded to the beneficiary.
• Increasing Annuity: This option ensures that the annuity payments increase at a rate of 3.00% per annum, helping to keep pace with inflation.
• Spouse Coverage (50%): If you pass away, 50% of the annuity continues to be paid to the spouse for their lifetime.
• Spouse Coverage (100%): This option ensures the spouse receives 100% of the annuity payments if you pass away.
• Survivor Benefit: After your and your spouse's death, the annuity purchase price is refunded, while 100% of the annuity continues to be paid to the spouse during your lifetime.

How Do You Check the Status of NPS Withdrawal?

Follow the steps below to check the status of the NPS withdrawal:

• Visit www.cra-nsdl.com.
• Click 'Limited Access View' before logging in.
• Select 'Exit Withdrawal Request' and then select 'Withdrawal Request Status View.'
• A new page will open, displaying your NPS withdrawal online status.

Additionally, you can use Limited Access View, a pre-login feature on the CRA website homepage, to view your NPS withdrawal online status conveniently.

What are the NPS Taxation Rules?

National Pension Scheme (NPS) withdrawals are subject to taxation, with rules varying based on the type of withdrawal. Here's an overview:

1. Partial Withdrawal:

   • Zero tax for partial withdrawal of NPS contribution.
   • No tax if the withdrawal is made after at least 10 years of subscription.
   • Lump sum withdrawal is limited to 25% of the total contribution, allowable three times during the NPS account's lifetime.

2. Premature Exit:

   • 20% of the lump sum withdrawal is taxable.
   • Mandatory conversion of 80% corpus into the annuity, taxed according to the applicable slab in the payout year.

3. Superannuation (Maturity):

   • No tax on 60% of NPS withdrawal at superannuation (maturity).
   • Mandatory conversion of 40% of the NPS withdrawal into annuities.

What are NPS Exit Rules?

NPS exit rules allow you to exit from the scheme at retirement age, offering two main options for withdrawal of the corpus. One option involves annuity purchase, while the other allows for deferred withdrawal. Specific conditions apply based on age and market conditions.

1. Annuity Purchase:

   • 40% of the corpus must go toward purchasing an annuity.
   • The remaining 60% can be withdrawn either as a lump sum or in installments.

2. Deferred Withdrawal at 60:

   • You can defer the annuity purchase for up to three years after reaching 60.
   • This option is available primarily for those with a large portion of their contributions in equities.
   • The withdrawal can be delayed if market performance is poor at the time of retirement.
   • A written request must be submitted 15 days before retirement.

3. Additional Points:

   • If you pass away during the deferment period, your spouse is eligible to use the funds to purchase an annuity.
   • In situations where market conditions are not ideal, the withdrawal of the corpus can be postponed to a later date.
   • To initiate the deferment process, a written request must be submitted to the concerned authority at least 15 days before retirement.

To Wrap Up

Understanding the rules around NPS withdrawal online helps you make informed choices about your retirement funds. Whether you choose a lump sum, an annuity, or defer the process, knowing the specifics ensures you're prepared. These options vary depending on whether you're a government or private-sector employee, giving you the flexibility to match your individual needs.